1. DTEK: THE LEADER IN UKRAINIAN
COAL & ENERGY MARKETS
SEPTEMBER 2011
2. CONTENTS
DTEK at a glance
Ukrainian energy market overview
Operations
Financials
Back-up
2
3. LARGEST PRIVATE VERTICALLY INTEGRATED ENERGY COMPANY IN UKRAINE
Power
Coal production Thermal power generation
supply & sales
Share in coal mining in Ukraine Share in power generation in Ukraine¹ Share in power supply in Ukraine²
11,5%
18,8% DTEK
8.0%
DTEK DTEK 12.0%
28.1% 18,7% 27.3%
23,7%
DTEK
Dneproenergo
Zapadenergo DTEK
Centrenergo Affiliated with DTEK
Donbassenergo Other
1 As of 30.06.2011, DTEK owns 47.55% of Dneproenergo, 39.98% of Kievenergo and 25.06% of Zapadenergo Source: DTEK. The Main Data Processing
2 Center of NPC Ukrenergo
As of 30.06.2011, DTEK owns 30.6% of Donetskoblenergo and 39.98% of Kievenergo 3
4. LONG-TERM GOALS
Fuel:
Coal mining > 50 m t Energy
Gas production > 3 bn m3
Society Consumers
Power Generation:
Thermal generation > 16 Gwt
Renewable energy sources > 1 Gwt
People Ukraine “Plus”
Power Supply:
Electric power supply > 60 bn Kwt h
Efficiency
Thermal power supply > 15 000 Gcal
4
6. CONTENTS
DTEK at a glance
Ukrainian energy market overview
Operations
Financials
Back-up
6
7. POWER GENERATION MARKET
Thermal power plants are the only generation assets in Ukraine with available capacity to meet mid-
term electricity consumption growth
Breakdown of Ukraine’s electricity production, gross Power plants output to WEM, TWh
Nuclear Nuclear Power Plants 41, 5
47%
Others Thermal Power Plants 32 ,6
9%
Combined Heating Power Plants 7,5
Hydro
7%
Hydro Power Plants 6 ,2
Non-conventional Power Plants 0,2
Thermal
37%
Installed capacity, MWt Installed capacity utilization, %
Thermal & Combined
33 774
Heating Power Plants Nuclear Power Plants 73
Nuclear Power Plants 13 835 Thermal & Combined Heating
31
Power Plants
Hydro Power Plants 5 458 Hydro Power Plants 27
* All figures are 1H 2011 actual Source: DTEK, Main Data Processing Centre of NPC Ukrenergo 7
8. THERMAL POWER GENERATION MARKET
GenCos share of thermal power generation, % GenCos output to WEM, TWh
Vostokenergo
27% Vostokenergo 8,9
Centrenergo Dneproenergo 7,8
19%
Centrenergo 6,2
Dneproenergo
24% Zapadenergo 6,1
Donbassenergo
11%
Donbassenergo 3,7
Zapadenergo
19%
GenCos installed capacity, MWt GenCos Average tariffs, kop/ kWt h
Dneproenergo 4651* 60,00
53,33
44,80
Zapadenergo 4650
40,00 33,24 36,75
Centrenergo 24,89
4600** 20,9
20,00 17,26
Vostokenergo 4157
0,00
Donbassenergo 2705 2005 2006 2007 2008 2009 2010 1H 2011
* Dnepronergo’s installed capacity is net of suspended oil & gas power units, ** Centrergo’s installed capacity is net of suspended oil & gas power units,
and out of service units (8185 MWt including all units) (7600 MWt including all units)
* All figures are 1H 2011 actual Source: DTEK, the Main Data Processing Center of NPC Ukrenergo 8
9. UKRAINIAN ENERGY CONSUMPTION TRENDS
Electricity demand is expected to grow at CAGR +3.7% in 2011-2020. In the mid-term (2011-2015) industry
electricity consumption is expected to grow at CAGR +2.8%. Households demand should outperform the industrial
sector with CAGR +6%, coming from the lowest in Europe electricity consumption per capita levels.
Electricity consumption by categories, Mwh
158 689
148 528 147 893 147 483
143 463 134 506 Households
137 922
29 011 31 920 39 382
28 276 Other non-industrial consumers
26 444 37 674
34 396
Commercial households
Construction
Transport
77 866 79 761 82 508 78 351 Agriculture
77 244 71 517
63 985
Industry
2005 2006 2007 2008 2009 2010 2011e
All figures are 1H 2011 actual Source: DTEK. National Electricity Regulatory Commission of Ukraine (NERC)
9
10. HOUSEHOLD TARIFFS ARE AMONG THE LOWEST IN EUROPE
Average households electricity rates in Europe, €/ Kwh
The average household tariff for the EU-27 is 0,16
Ukraine min 0,025 below 150 kWt per month €/Kwh. with the striking difference to Ukraine at
0,025 - 0,033 €/Kwh.
Ukraine max above150 kWt per month
0,033 To bring Ukrainian tariffs to an economically
justified level a four-fold increase is needed.
Russia 0,08
Romania 0,11
Latvia 0,11
Lithuania 0,13
Tariff Growth in Ukraine, kop/kWh
France 0,14
Industrial, 1st class
Finland 0,15 Industrial, 2nd class
Households, consumption to 150 kWh
78,4
Poland 0,15 80,0
70,0
United Kingdom 0,15 61,0 61,3
66,8
60,0
Hungary 0,17 45,9
50,0
51,6
48,3
Slovakia 0,17 40,0
36,1 28,0
Austria 0,20 30,0
21,9
20,0
Germany 21,9 21,9
0,26
10,0
Denmark 0,29 2008 2009 2010 2011E
Source: Europe‟s Energy portal, DTEK All figures are 1H 2011 actual
10
11. UKRAINIAN COAL AND GENCOS CONSUMPTION
Coal remains by far the most important fuel for Ukrainian thermal GenCos, accounting for 96% of
their total fuel (natural gas accounts for 4%).
Coal consumption by GenCos, in concentrate, G,DG,T,A grade, thousand tonnes
Thermal and anthracite coal mining, in concentrate, G,T,A grade, thousand tonnes
Average yearly coal price, per tonne, in concentrate (ash 23%, wet 8.9%)
40000 800
776
35000
593
30000 600
528
25000 456
20000 400
330
15000
222 263
10000 200
34972
25873
32166
35359
27458
30467
34677
31785
30861
29318
31344
29502
28830
32197
5000
0 0
2005 2006 2007 2008 2009 2010 2011E
DTEK is a vertically integrated energy company in Ukraine with complete production chain
from coal mining to electricity generation and supply. Today DTEK fully covers the needs of
its thermal power generation with its own coal.
Fuel supply Power plant Distribution
11
12. CONTENTS
DTEK at a glance
Ukrainian energy market overview
Operations
Financials
Back-up
12
13. 1H 2011: СOAL PRODUCTION
DTEK runs some of the most efficient and high quality mines in Ukraine, maintaining constant focus
on enhancing operations and cost efficiency.
ROM output, Labor productivity, Cost of production,
kTonnes* Tonne per month/ worker* UAH/ Tonne*
Average 57 Average 350
Pavlogradugol 7812 Komsomolets Komsomolets Donbassa 288
90
Donbassa
Rovenkiantracite 3834
Krasnoarmeyskaya 90 Pavlogradugol 305
Krasnoarmeyskaya 3245 Pavlogradugol 76 Sverdlovantracite 309
Sverdlovantracite 3241 Sverdlovantracite 60 Rovenkiantracite 376
Krasnodonugol 2896 Rovenkiantracite 50 Dobropolyeugol 384
Komsomolets Donbassa 2060 Krasnodonugol 46 Krasnoarmeyskaya 467
Dobropolyeugol 31 Krasnodonugol 518
Dobropolyeugol 1563
DTEK coal mining growth, kTonnes
11 127 11 435
+2,7%
1413 +10,6% 1563
Dobropolyeugol *Dobropolyeugol is consolidated as of January 4th 2011
2036 +1.2% 2060
All figures are 1H 2011 actuals . Source: DTEK, company data
Komsomolets Donbassa
7678 +1.7% 7812
Pavlogradugol
1H 2010 1H 2011 13
14. 1H 2011: THERMAL POWER GENERATION
DTEK’s TPPs are among the most efficient on Ukrainian power generation market. Vostokenergo’s
TPP`s have highest production volumes and capacity utilization rates.
Production volumes, TWh Capacity utilization rate, % * Fuel consumption, WEM tariffs by GenCos**,
Gr / kWh kop / kWh
Vostokenergo 9, 786 Vostokenergo 54 Dneproenergo 378,9 Zapadenergo 59
Dneproenergo 8 ,476 Dneproenergo 42* Vostokenergo 380,7 Vostokenergo 55
Donbassenergo 35 Centrenergo 397,2 Dneproenergo 52
Centrenergo 6, 730
Centrenergo 34*** Zapadenergo 403,1
Zapadenergo 6, 703 Centrenergo 51
Zapadenergo 33 Donbassenergo 417,8 Donbassenergo
Donbassenergo 4, 132 47
* Dnepronergo’s ICUR is given net of suspended oil & gas power units and out of service units
(21.84% including all units)
** Investment mark-up is not included
***Centrergo’s ICUR is given net of suspended oil & gas power units,
(20,4% including all units )
All figures are 1H 2011 actual Source: DTEK, the Main Data Processing Center of NPC Ukrenergo 14
15. 1H 2011: POWER SUPPLY
Electricity transmission & sales, Mwh Nominal vs. Actual transmission losses, %
Nominal transmission losses, % Actual transmission losses, %
Dneprooblenergo 11 438
16,6
Krymenergo
16,1
Service-Invest 6 525
17,5
Donetskoblenergo
15,6
Zaporozhyeoblenergo 4 182 17,7
Odessaoblenergo
13,8
LEO 4 119 12,6
LEO
13,6
14,8
Donetskoblenergo 4 057 Kharkovoblenergo
13,1
9,8
Kievenergo 4 038 Zaporozhyeoblenergo
9,8
11,0
Kievenergo
Kharkovoblenergo 3 349 8,9
8,8
DTEK Energougol ENE
Odessaoblenergo 8,0
2 790
6,3
Dneprooblenergo
5,0
Krymenergo 1 996
2,3
Service-Invest
1,0
Source: National Electricity Regulatory Commission of Ukraine (NERC)
All figures are 1H 2011 actual 15
16. 1H 2011: COAL & ELECTRICITY EXPORTS
DTEK is the largest privately-owned exporter of coal and electricity in Ukraine with ambitious plans to increase
export volumes.
Coal export revenue grew from USD 65 mln
(1H 2010) to USD 231 mln (1H 2011)* Electricity export
demonstrating 253% growth
Coal export
Coal export breakdown, thousand tonnes
183% OTHER – 0.27
1 865 mln tonnes
658
Belarus
1H 2010 1H 2011 Poland
Electricity export revenue grew from USD 14
mln (1H 2010) to USD 146 mln (1H 2011)*
EUROPE – 1.05 Slovakia Moldova
demonstrating 934% growth mln tonnes
Hungary
Electricity export, mln KWh Romania
Bulgaria
738%
2 138 Turkey
255 MEDITERRANEAN
and AFRICAN
1H 2010 1H 2011 COUNTRIES – 0.16
mln tonnes
*Using NBU exchange rate as of 30 Jun 2011 – 8,10 UAH per USD
16
17. POWER PLANTS MODERNIZATION
Vostokenergo. Vostokenergo.
Kurahovskaya TPP Luganskaya TPP
Unit-by-unit retrofit Unit-by-unit retrofit
(200+222+225+4х 210 MWt) (3х175+ 4х200+ 100 MWt)
Dismantling of the boiler, turbine, generator, Dismantling of the turbine, generator, Automated
Modernization
Automated Process Control System, and Process Control System, and scrubbers completed
results
electrostatic precipitator completed New equipment: full turbine upgrade (Turboatom,
New equipment: Ovation (Emerson) software- Power Machines), Ovation (Emerson) software-
technical unit for upgrading the Automated technical unit for upgrading the Automated Process
Process Control System Control System
New transformer, thyristor excitation system (АВВ) New starter for the generator installed
installed By the end of 2011, one block will be reconstructed.
Two blocks have been reconstructed so far. By the By the end of the program in 2016, modernization of
end of 2011, the modernization of one more block five energy blocks will be finished.
will be finished. By the end of program in 2016,
four more energy blocks will be reconstructed.
Investments USD 22, 420 mln
USD 72, 778 mln
2008-1H 2011
Project start – April 1, 2008 Project start - October 12, 2009
Timelines Expected completion (Management‟s view) – Expected completion (Management‟s view) –
November-December 2016 November-December 2016
17
18. AMBITIOUS CAPEX PLANS
Total Capex, USD mln* Capex Coal mining, USD mln*
700 300 281 278
572 263 261
600 556 49
250
45 56
486 22 24 211 63
500
22 420 200
39
371
400 254 238 21 139
150 128 144
28 186 116
300 122 103
118 100
200
50 90 93
263 281 278 261 69 78 82
100 211
0
0 2011E 2012E 2013E 20114E 2015E
2011E 2012E 2013E 2014E 2015E
Coal Power generation Distribution Mining development Equipment purchase Major overhaul
Capex Power generation, USD mln* Capex Power distribution, USD mln*
Partially funded via tariff investment mark up Fully funded via tariff investment mark up
300
Other Modernization Including investment mark-up 40
254
250 238 Grid modernization Other
32 30 28
186 27
200
3 24
31 212 22 22 21
2
150 118 201 122 20 3 2 2
100 33 25
155 25
10 20 22
19 19
50 96
85
- 0
2011E 2012E 2013E 2014E 2015E 2011E 2012E 2013E 20114E 2015E
* For comparison, UAH values of exact planned CAPEX are converted into USD at UAH 7.91/USD
18
19. CONTENTS
DTEK at a glance
Ukrainian energy market overview
Operations
Financials
Back-up
19
21. EBITDA GROWTH MAIN DRIVERS
2 199
1H 2011, actuals 2010,
(-) 5 373
1H 2010, fact
1H 2010, actuals
fact
5627
30
2 643 Volumes Price/Mix Cost of Sales Other 5 068,0
All figures are 1H 2011 actual
21
22. HEALTHY DEBT PROFILE
Loan portfolio, USD mln Loan maturity profile*, USD mln
800
600
691 524
604
600 554
450
485
400 300
200 150
48
9 20 7
0 0
2008 2009 2010 1H 2011 2011 2012 2013 2014 2015
Debt currency profile, USD mln Loan portfolio by types of financing, USD mln
EUR
ECA financing
8% 10% USD 8% 10% Eurobond
UAH
Credit lines
82%
82%
* Undiscounted principal amount repayment
All figures are 1H 2011 actual
22
23. LOW LEVERAGE LEVELS
Key leverage ratios Credit ratings
Ratio 2008 2009 2010 1H 2011 Rating Outlook Last review
Gross Debt* Fitch
1.1 1.2 0.9 0.7 LT FC IDR B Positive July 2011
Adj EBITDA**
LT LC IDR B+ Positive July 2011
Net debt***
0.9 1 0.6 0.4 Moody's
Adj EBITDA**
LT CFR B2 Stable Nov 2010
Adj EBITDA**
13 8 13.5 23.8
Interest expenses
“The ratings reflect DTEK's leading positions in the Ukrainian
• Gross debt - bank loans, accrued interest and Eurobonds
coal mining, thermal power generation and distribution sectors…
** Adjusted EBITDA represents profit for the year after excluding the following DTEK continues to benefit from a high level of integration
non-operating income statement items: foreign exchange losses less gains
from borrowings, certain finance costs, income tax expense, depreciation and between its coal-mining and coal-fired power generation
amortization and impairment of property, plant and equipment. business units, which helped it maintain its operating margins…“
*** Net debt - bank loans, accrued interest and Eurobonds less cash and cash
equivalents. Calculated for information purposes only. Fitch Ratings, 2011
23
24. DTEK’S LEVERAGE IS WELL BELOW INDUSTRY PEERS
Debt/EBITDA, 2010 actual
DTEK‟s leverage is well below the industry
average, which provides flexibility in delivering 5.1
5 strategic growth objectives and puts the
company in a comfortable position in an
4,2
environment of tight debt markets. 3,9 3,95
4
3
Average 2.6
2,8
2,1 2,1
2 1,8
1
0,9
0
DTEK EnBW RWE Endesa E.ON EDF Enel Verbund EDP
All figures are 2010 actual. Source: DTEK, companies‟ data
24
25. CONTENTS
DTEK at a glance
Ukrainian energy market overview
Operations
Financials
Back-up
25
27. SELECTED FINANCIALS 2005 – 2010, USD
mln USD 2005 2006 2007 2008 2009 2010
Income statement
Revenues 738 1 000 1 776 2 462 1 926 3 061
Sale of steaming and coking coal 334 202 318 647 600 1 211
Sale of electricity to electricity pool 402 684 889 1 076 711 989
Sale of electricity to final customers 0 107 475 709 600 854
Other sales 2 7 94 31 15 7
Operating expenses 587 751 1 296 1 806 1 469 2 288
Cost of electricity purchased for resale 0 100 438 668 655 1213
Raw materials 261 153 250 342 298 477
Staff cost, including payroll taxes 260 324 379 572 388 449
Other expenses, net 66 174 229 224 127 148
EBITDA 152 249 480 656 458 774
EBITDA margin 20.5% 24.9% 27.0% 26.7% 23.8% 25.3%
Depreciation 54 57 153 205 183 186
EBIT 98 192 328 451 274 587
EBIT margin 13.2% 19.2% 18.4% 18.3% 14.2% 19.2%
Net profit 52 98 236 23 110 360
Average x-rate USD/UAH 5,12 5,05 5,05 5,27 7,79 7,94
Balance sheet
Non-current assets 664 1 479 2 254 2 024 2 026 2 357
Current assets 127 257 400 322 506 863
- out of that cash and cash equivalents 17 237 73 77 93 213
Total assets 791 1 736 2 654 2 347 2 531 3 220
Shareholders equity (including minority) 473 1 026 1 400 1 297 1 352 1 668
Interest bearing debt 29 170 386 485 555 691
Other liabilities 289 540 869 565 625 861
Total liabilities 318 710 1 254 1 049 1 180 1 552
Average x-rate UAH / USD 5,05 5,05 5,05 7,7 7,99 7,96
27
28. ENERGY MARKET OF UKRAINE: REGULATORY FRAMEWORKS
Power generation market is regulated by:
Regulatory framework
• Ministry of Energy and Coal Industry of Ukraine (regulator)
• National Electricity Regulatory Commission of Ukraine (regulator)
• Energorynok (single state operator).
Investments are included in tariffs for all NPPs, HPPs and CHPPs
Investment The tariff for TPPs includes:
compensation model
• 80% of project implementation costs
for GenCos
• 95% of environmental investments
Investment Currently, the regulator approves an annual figure for investments and includes it
compensation model in the tariff.
for distribution
companies
Annually, the regulator sets a losses standard for each company. If actual losses
Losses compensation are lower, it translates into profit; if higher, it translates into losses.
model
Source: DTEK
28
29. UKRAINE ЕNERGY MARKET: REGULATION MODELS EVOLUTION
Current model of the Wholesale Energy market (single buyer pool) Bilateral contracts market with a balancing market
Price claims Ministry of energy GenCos Ministry of energy NERC Consumers
Suppliers by
regulated tariff
State TPP NERC
System‟s operator: State company „Ukrenergo‟
Generation
NC ECU Distribution
NC EKU Bilateral contracts Electricity
DTEK: System‟s operator: market transmission and
State company Bilateral supply Qualified
Vostokenergo DTEK:
„Ukrenergo‟ contracts Direct consumers
Service-Invest
DTEK Energougol market contracts
installed Suppliers by
ENE
Tariff approved by NKRE capacity Exchange unregulated
market „24 tariff
State oprartor VSE Export
hours prior‟
„Energorynok‟ AES
NPP Balancing
market Balancing
installed market
HPP Other suppliers by Suppliers by Unqualified
regulated tariff capacity
regulated tariff consumers
CHPP Export
HPP Balancing
mechanism
State operator HNPP
Other GenCos
„Ukrinterenergo‟ Independent suppliers by
including
WPP non-regulated tariff
System‟s operator: State company „Ukrenergo‟
‟
Advantages of the current model: New market model characteristics:
• Simple in arrangements and price-setting
• Practically guaranteed purchases of electricity from generating • The new market mechanism is based on the concept of bilateral contracts
companies. between generating companies and electricity suppliers
• Suppliers, at an unregulated tariff, supply electricity to qualified consumers,
Drawbacks of the current model: and suppliers, at a regulated tariff, supply it to unqualified consumers
• High level of administrative interference • The process of centralized planning and managing of electricity generation
• Imperfect price-setting system, cross-subsidies schedules by the market is replaced with a process of load schedules being
• No market system and ancillary services. compiled based on consumer use, supplier load and volume
• The balancing mechanism provides for balancing deviations in the declared
Advantages of the new market model:
amounts of electricity generation and actual consumption. The operator
• The market is competition-based
controls fulfillment of load schedules and can manage imbalances in the
• Low administrative interference
system.
• Favorable investment climate.
Source: DTEK
29
30. UKRAINE ENERGY MARKET: TRANSITION TO RAB MODEL
Since 2007, The National Electricity Regulatory Commission, together with a group of foreign consultants supported by the
European Bank for Reconstruction and Development, has been implementing a project to introduce an incentive tariff-setting
system in the electricity distribution market in Ukraine.
The 2010-2014 Economic Reforms Programme and the 2011 National Action Plan envisage switching to incentive-based tariff-
setting. The following has been planned for 2011, but has not been implemented so far:
• Introducing amendments to the Law On Natural Monopolies
• Designing and introducing methodology for incentive regulation – approval of the methodology by NERC.
The baseline scenario assumes that the new model will start functioning in 2013. Switching to the new tariff regulation, which
should stimulate companies to improve their efficiency and investment attraction, should be accompanied by transmission and
supply tariff growth.
STAGE I STAGE II STAGE III
2011 2012 2013 2014 2015 2016
• Stage where the incentive tariff- • The incentive tariff-setting method
• Preparing the tariff-setting has been fully introduced.
mechanism. setting mechanism is in place, but
• Amending administrative-regulatory market conditions allow participants
documents. to adapt to the new rules without
considerable financial risks.
Source: DTEK
30
31. MEMBERSHIP
EU-Ukraine Eurelectric European American European UN Global US-Ukraine
Business Business Chamber of Association for Compact Business
Council Association Commerce in Coal and Council
Ukraine Lignite
31
33. This document may contain forward-looking statements related to planned measures or future financial indicators of DTEK.
Accordingly, actual results may differ materially from those expressed or implied by the forward-looking statements. We undertake
Спасибо за внимание!
no obligation and do not intend to update these forward-looking statements to reflect events or circumstances occurring after
publication date. You are cautioned not to place undue reliance on these forward-looking statements, which are pertinent only as of
the date of this document. By their nature, forward-looking statements are subject to numerous assumptions, risks and
uncertainties.
33
